Reserve Bank Proposed Changes to Bank Policy Relating to Investment Property Lending

In July this year the Reserve Bank proposed changes to bank policy relating to investment property lending. The consultation period has now finished and the new rules have been agreed to and will come into play formally on 1 October. The policy imposed a 40% deposit/equity requirement on borrowers buying rental properties.

In recent weeks I have had approvals via 3 different non banks for clients seeking to buy a rental property with less than the required 40% deposit. These approvals were via banks that are not registered NZ banks and therefore are not subject to the Reserve Banks rules.

Here are the details:

Loan 1 75% LVR with an interest rate of 4.95% fixed for 1 year
Loan 2 80% LVR with an interest rate of 5.29% fixed for 1 year
Loan 3 85% LVR with an interest rate of 5.85% fixed for 1 year

A strategy I am seeing is splitting of the owner occupied home lending and rental lending with different banks. Refinances are exempt from the reserve bank restrictions so splitting can occur before you need to consider your next transaction (either buying or selling).

Builds are exempt from the restrictions also so a 40% deposit/equity isnt required for these (either section +fixed price build or turn key builds).

Its become more complex to borrow however there are solutions. Please get in touch if I can help.